Smaller businesses may be in for larger tax breaks via a recent proposal by state lawmakers.
Legislators have introduced a bill to modernize portions of the Business and Occupation (B&O) tax to lower its negative effects on small business owners, and representatives from the business community are welcoming the measure, saying it is long overdue.
The bill, HB 2672, is sponsored by State Rep. Joe Schmick (R-9), and its cosponsors include State Reps. Bruce Chandler (R-15) and Cary Condotta (R-12).
On February 5, Schmick told members of the House Finance Committee that his bill would give business owners a needed break while giving back to the state’s economy.
“We haven’t adjusted rates on the thresholds for when you start paying B&O for a number of years, and this would help every single small business in the state, whether it’s the coffee shop, or whether it’s the beauty parlor.”
The B&O tax is imposed on the gross receipt of business activities and is dependent on a company’s classification of operations. For example, a Washington-based retail business pays a B&O rate of .015, where a manufacturing business pays .00484.
HB 2672 would increase the B&O gross receipts filing threshold to $150,000 for service business and $125,000 for other companies.
The bill would also increase the B&O small business tax credit to $185 per month for service companies and $50 per month for other businesses. The current credit is $70 for service businesses and $35 for others.
“I do believe that when a small business gets a break like this, they invest back in their business…this will give them a chance to hire even with increased minimum wage,” Schmick told colleagues.
“Yes, it is going to cost the state some money,” he continued, “but we don’t take into account the increased spending by those small business owners that I do believe would offset this.”
Patrick Connor, Washington State Director of the National Federation of Independent Business (NFIB), spoke to the bill’s importance for small business.
“It has been far too long since an adjustment has been made to the reporting thresholds or to the small business tax credit amount. You guys often hear requests from various industries and business to give them a break because they are having a tough time competing.”
Connor added he hopes lawmakers take a “hard look at this bill, because it would finally give small businesses relief.” He added that the filing threshold adjustments would be “more in line with changes in the economy and inflation.”
Also testifying in favor was Mark Johnson, Vice President of Government Affairs for the Washington Retail Association (WRA).
“We have about 3,500 storefronts throughout the state…about 90 percent of them are small businesses with 50 or fewer employees. This would definitely help out a vast majority of our membership, and we think it is a reasoned step that is way overdue.”
The bill is not currently scheduled for public hearing or executive action in committee.